Cramer: Defense, the dollar and tech make up the market’s ‘new normal’

As news continues to emerge from Texas after Hurricane Harvey, CNBC’s Jim Cramer noticed investors shifting their focus to several other stock market themes.

“First feature of the new normal? America’s not the world’s policeman anymore,” the “Mad Money” host said. “Sure, an attack on Japan is like an attack on us. But if North Korea ever sends a missile at Japan instead of over it, that missile needs to be headed off. The question here is who pays for the Patriot missiles … to shoot North Korea’s nukes out of the sky?”

The answer is Japan, and the seller will be Raytheon, Cramer said. Shares of defense stocks like Raytheon, Lockheed Martin and Kratossurged at Tuesday’s open after North Korea fired a ballistic missile that flew over Japan’s airspace before breaking apart and falling into the sea.

Cramer doesn’t think the world will see a time like his childhood, when fallout shelters and nuclear war drills in schools were the norm, anytime soon. But any government committed to dealing with North Korea’s missile tests has to consider its defense infrastructure, he said.

“Many countries will need to have missile defense systems, particularly since the North Koreans have no particular aptitude for trajectories but know how to launch missiles with seeming impunity,” the “Mad Money” host said.

The market’s second influence is the weakening U.S. dollar, Cramer said. The dollar slid to its lowest level in over 2-½ years against several major currencies including the Japanese yen and the euro in the wake of North Korea’s missile launch.

But Cramer argued that the euro’s rise was even more important than the dollar’s decline.

“This euro rally means that European exporters will have much less of an advantage versus our companies,” he said. “That’s tremendous news for American businesses that thrive on a weak dollar.”

Apple has one such business. Apple’s stock hit a record high on Tuesday after research firm IDC reported strong 2018 estimates for the company’s widely anticipated new iPhone release.

Cramer said Apple has a lot of things going for it, including the iPhone launch, good iPhone 7 Plus sales and Best Buy’s earnings report, which cited strong demand for smartphone and wearable device products like Apple’s.

The “Mad Money” host also anticipated an Apple endorsement from Warren Buffett ahead of the billionaire investor’s interview with CNBC’s Becky Quick on Wednesday.

“[Buffett] views it as a consumer product company, and the average consumer product stock trades at 24 times earnings, yet it is lucky to have even 2.5 percent growth, whereas Apple has much faster growth with a stock that’s way cheaper,” Cramer said.

And while Cramer said Wall Street may still be underestimating how a stronger euro could affect other consumer goods companies like 3M or Johnson & Johnson, he had little doubt that the right place to be in the market right now is tech.

After Best Buy’s second-quarter report showed traction in home appliances, automated devices, mobile phones and personal computers, Cramer said there were obvious beneficiaries.

“That’s pretty much a recipe for the internet of things stocks, which could use a boost after several days of relentless selling,” Cramer said. “I remain adamant that the best places to be are the companies, especially the [semiconductor makers], that can capitalize off voice technology and the upcoming iPhone launch.”

And as retail — the worst place to be, in Cramer’s eyes — suffers relentlessly, with Finish Line releasing a much weaker-than-expected earnings report, Cramer’s final market theme was the devastation in Houston.

“The worst-case scenario for Houston is indeed playing out when it comes to property damage,” Cramer said. “The damage from the storm leaves the fourth-largest city in America badly in need of a wholesale remake, which means that Houston will likely require a huge amount of federal money — like it or not, Feds — to get back to the way it used to be.”

Cramer’s initial prediction that insurance stocks would take a hit and become discounted buys before rebounding seems to be playing out.

The “Mad Money” host also recommended building material manufacturer USG, motor home maker Thor Industries and United Rentals as good bets on the imminent need to rebuild in Texas.

“The bottom line: We’re back to business as usual — only more so — with a Houston twist, almost as though it’s a television show that’s back to its regularly scheduled programming. And for the most part, the market likes what it’s seeing, hence today’s fabulous intra-day bounce … that I think could have some staying power barring errant missiles or a much worse turn to what many people are calling ‘the storm of the decade,'” Cramer said.